How long to fix

Tomtom07

Like everyone else we are looking to re-mortgage as our current fixed ends feb 2023.  All the information on here is amazing as always, but there seems to be no suggestion what would be the best length to fix for. 

Any suggestions if this is a short term issue and a 2 year fixed is the way to go or should I be looking at 5 years? 

valleyboy22

Asked the same question not long ago. Hoping to that some people can advise. 

Tomtom07

valleyboy22 said:

Asked the same question not long ago. Hoping to that some people can advise. 

Some how i missed this before I posted my question, hope this helps?

https://forums.moneysavingexpert.com/discussion/6390336/how-long-to-fix-for#latest

AndyJR

There is no right or wrong answer on this. Who knows what the future holds. How big is the mortgage, what % of your income has to go on your mortgage in terms of minimum repayments, what other borrowing/outgoings do you have, what is your risk appetite etc, could you service the mortgage if rates were still high after 2 years etc. etc. etc

You need to play with the calculators in terms of 'what if' scenarios and see how you feel about different outcomes based on your individual circumstances. 

Some people with small mortgages may be thinking about chancing staying on a competitive tracker because they might be predicting they can take a period of proportionally very high payments but are predicting that a recession (or even depression) may bring rates right back down not long after. If they are right they could win big in terms of overall interest payments. However some think the period of abnormally low BoE rates is now over (i.e. sub 3% rates). Therefore some who are providing for a family, have one income etc. might be very risk adverse and tie themselves into a 7 plus year fix, knowing they can then easily manage the payments provided their household income stays similar. Who can blame them. Sometimes you can't put a price on piece of mind. For most having confidence in the borrowing for your home is very different from playing around on with a few grand with a stocks and shares isa's.

It doesn't mean anything to your individual circumstances, but i've fixed for 5 years from when my current fixed rate finishes end of January. The rate is higher than what I'm paying at the moment, but psychologically the minimum repayments are basically the same as what I pay at the moment, given the overpayments I've been making over the last couple of years. With a 5 year fix I should also be able to overpay further to bring the capital down to level where I am less worried about rates after that five year fix ends. We love where we live, have a 1 year old growing up fast and a 6 year old established in a local primary school he loves. Any sort of circumstance that resulted in having to do a forced sale would be rather devastating. Those are the sorts of thoughts that have informed my choices.  

london21

 I will opt for 5 years personally because some certainty and cheaper at present. 

Viking_mfw

We have opted for 10 - our circumstances are similar to what AndyJR described above, plus we are already at the lowest LTV rate on our home. The allowed OPs mean we could pay it off entirely in those 10 years although I see very little likelihood of that happening! The rate we got is still reasonably low historically (3.74) and I don't see us going back to the very cheap mortgages soon if ever. 

jonnypb

I was going to fix for 5 years, but many people are saying 2. There seems to be an incline from some that long term the rates aren’t going to keep rising and after next year they’ll settle down, which is why many 2 year fixed rates are more expensive than 5 year fixed. NatWest could offer me 3.9% 5 year fixed or 4.1% 2 year fixed.

Mortgage broker suggested this and I have also heard it on a couple of podcasts, but they say if you want certainty and can get a rate of 4% then a 5 year fix isn’t a bad deal and gives you certainty. Obviously no one knows what will happen so everything is a risk.

GAMBITv5

jonnypb said:

I was going to fix for 5 years, but many people are saying 2. There seems to be an incline from some that long term the rates aren’t going to keep rising and after next year they’ll settle down, which is why many 2 year fixed rates are more expensive than 5 year fixed. NatWest could offer me 3.9% 5 year fixed or 4.1% 2 year fixed.

Mortgage broker suggested this and I have also heard it on a couple of podcasts, but they say if you want certainty and can get a rate of 4% then a 5 year fix isn’t a bad deal and gives you certainty. Obviously no one knows what will happen so everything is a risk.

Depends on many things.

what’s stopping another macroeconomic disaster (Russia, Kamakwasi, covid) changing the battleground once more. 

jonnypb

GAMBITv5 said:

jonnypb said:

I was going to fix for 5 years, but many people are saying 2. There seems to be an incline from some that long term the rates aren’t going to keep rising and after next year they’ll settle down, which is why many 2 year fixed rates are more expensive than 5 year fixed. NatWest could offer me 3.9% 5 year fixed or 4.1% 2 year fixed.

Mortgage broker suggested this and I have also heard it on a couple of podcasts, but they say if you want certainty and can get a rate of 4% then a 5 year fix isn’t a bad deal and gives you certainty. Obviously no one knows what will happen so everything is a risk.

Depends on many things.

what’s stopping another macroeconomic disaster (Russia, Kamakwasi, covid) changing the battleground once more. 

Nothing, which is why I said no one knows what will happen so everything is a risk.......  But as some people in the financial industry have said there is a reason why many 2 year fixed are more expensive than a 5 year fixed right now.

GAMBITv5

I work for one of the high street banks in products. Nobody here is talking about this being a short lived thing and we’ve priced accordingly… Swap markets have been challenging for some time, most here are worried about exposure to 95% LTV creating neg equity problems a la 2008 period

caprikid1

"Mortgage broker suggested this "

As has been said there are so many factors in both the product (Portable, overpayments) and personal circumstances combined with attitude to risk.

There will be some people that cannot afford the rate of a 5 year fixed and will need to make provision for what to do in 5 years time and will go for a 2 year deal. For me it always feels like it's too much effort to remortgage every 2 years.

For me having come out of one 5 year fixed I have just gone into another at 3.x as I don't think long term it will be that far off.

A broker will often tend towards shorter terms as they can re-engage with the customer more frequently / get paid twice in the same period. 

With product fee's legal fees etc it is really important look at the Total cost over the period and not focus too much on rates as a £1500 product fee plus legals of £1000 on a £40000 mortgage equates to a considerable percentage if done twice over 5 years.